Housing costs in San Francisco are astronomically high. courtesy Wikimedia Commons

Rent control in San Francisco an ill-fated attempt to fight gentrification

San Fran should emulate Miami’s response to gentrification rather than trying to control prices.

San Francisco has an app dedicated to tracking public defecation. Seriously, it’s called SnapCrap. Look it up. Why would they need such a thing? Homelessness. As of 2017, San Francisco has an estimated homeless population of approximately 7,500, as compared to a total population of 884,000. What’s more, a reported 71 percent of those used to have a home in San Francisco before becoming homeless. Why are these people suddenly homeless? Ultimately, a perfect storm of ineffective rent control policies and unchecked gentrification have created this problem. Let’s start with gentrification.

Gentrification is the gradual change of a neighborhood through the influx of wealthy businesses and tenants. Just to be clear, gentrification is not inherently bad ⁠— a little bit of gentrification can revitalize a neighborhood and create an economic influx which benefits the people who already live there.

As an example of this, my hometown of Colorado Springs had a relatively stagnant neighborhood called Motor City (so named because of the copious amount of car dealerships in the area). In its death throes, this area’s only elementary school, the historic Ivywild School, closed in 2009 due to abysmal class sizes. However, a wealthy tenant bought said school and turned it into a craft brewery and bike shop, which spurred a chain reaction that revitalized the area. Today, Motor City is a completely different neighborhood swarming with flannel-clad, bearded hipsters on inordinately expensive mountain bikes, which I suppose is an improvement.

Larger cities and metro areas, such as San Francisco, are more prone to gentrification because the U.S. population continues to gradually urbanize, meaning most urban areas have a steady influx of affluent tenants and businesses. In San Francisco’s case, gentrification — combined with a robust tech sector and proximity to world-class attractions ⁠— creates one of the most expensive real estate markets in the nation. The average home costs about $820,000, and about $119,000 is needed to live comfortably, even with rent control policies affecting 60 percent of residential zoning.

So with a large homeless population, unaffordable housing and hills so steep my Honda can barely climb them, it’s no wonder that the citizens of San Francisco have protested against Veritas Investments, the city’s largest landlord, for charging rent increases to match rising costs of operations and maintenance. In fact, Veritas has responded by granting waivers to tenants who can “prove hardship,” meaning they either need to show that they are living on a fixed income, have less than $50,000 in savings or pay more than 30 percent of their income as rent.

This doesn’t address the underlying issue of immensely expensive housing. On account of that, the state of California recently passed legislation to instate rent control on a state level. The efficacy of rent control, however, is questionable: San Francisco has had rent control since 1979, and it has evidently not been an effective measure. In fact, San Francisco’s policy, which only covers about 60 percent of residential buildings, may have made things worse. This policy only covers buildings constructed before 1979; on account of that, property owners find it more profitable to demolish old vacant residential buildings and construct ultramodern luxury condos than working within the draconian constraints of rent control.

But what about California’s statewide legislation? Surely that will change things for the better, right? Probably not. Rent control de-incentivizes regular property maintenance and renovation because developers often do not have the ability to generate the capital to make these renovations; if it costs almost as much to own the property as the landlord is collecting from rent, landlords naturally won’t be able to afford what would otherwise be basic upkeep.

We can see this at work in New York City: projects such as 432 Park Ave, Hudson Yards and Central Park Tower all contain luxury housing exclusively to minimize risk of profit loss. A marginal increase of rent for a building’s tenants can avoid loss of profit; rent control prevents this from happening. Rent control in general sounds like effective and necessary policy, but in practice it incentivizes lower-quality offerings from landlords and stifles market competition.

With a de-incentivization of affordable housing on one hand and a steady influx of wealthy tech moguls and companies on the other, it’s no wonder San Francisco has seen displacement of lower-income residents at the hands of gentrification. How, then, is San Francisco to solve its housing crisis?

I would argue that San Francisco’s ideal solution is already underway in Miami, another city with world-class attractions and a very competitive job market. Because the most valuable views in Miami are on lots with ocean views, the Miami skyline is just that — a line. The ultra-luxurious apartments are built in one concentrated area, and consequently Miami as a whole is very livable; it costs roughly $77,000 to live comfortably in Miami, as compared to $119,000 to live comfortably in San Francisco. It’s also worth noting that neither the state of Florida nor the city of Miami have any rent control ordinances.

San Francisco, then, needs stricter zoning laws confining luxury apartments to a single area. The now-defunct ports facing into the San Francisco Bay are ripe for this sort of redevelopment. If San Francisco can find a developer willing to make a copycat of New York’s Hudson Yards project and subsidize affordable housing everywhere not zoned for luxury apartments, the city will see a reversal of this continued real estate escalation and simultaneously address its homelessness problem.

Post Author: Dominic Cingoranelli